Home buyers now have all reasons to be ecstatic with Reserve Bank of India (RBI) recent guidelines. After scaling down the repo rates by 50 basis points, Reserve Bank of India has increased the amount of loan banks can give against a property purchase-loan-to-value (LTV) along with reducing the risk weights for home loans. According to the new guideline, banks can provide home loans up to 90 per cent for the properties that costs Rs 30 lakh or below. Earlier, the facility was available only in cases where the property value was up to Rs. 20 Lakh. The apex body also stated that in the case of ‘individual housing loans’ for above Rs 30 lakh, the LTV ratio is now up to 90 per cent. For property costing between Rs 30 -75 lakh, the LTV is up to 80 per cent. And for above Rs 75 lakh, the home loan shall be up to a maximum of 75%. It has also redefined the provisioning or risk-weights norms for home loans.
Currently, the new guideline states that the risk weights shall be 50 per cent for a loan up to Rs 30 lakh, wherein the home buyer can avail up to 90 per cent of the loan for the property value. Whereas, in such cases where the buyer avail loan up to 80 per cent of the property value, the risk weight shall be 35 per cent. In urban areas, home loans up to Rs 30 Laks fall under the “affordable” category. While some banks add registration charges and stamp duty to calculate exact value of property and disburse a loan accordingly, some banks exclude government costs.
However, earlier, 90% home loans were available for property costs up to Rs 20 lakh. The new guideline issued by RBI is a big relief for home buyers who seek to buy low-cost housing. Also, this move will boost the government scheme called ‘Housing for all’, to build 20 million houses for the urban poor by the year 2022. In addition, banks are also expected to be benefited with this move as they have been struggling for capital.